Power sector gets boost as ATIDI offers Sh2.67b cover
Kenya’s power sector has received a significant boost with the Nairobi-based African Trade and Investment Development Insurance (ATIDI) extending its $20.6 million (Sh2.67 billion) liquidity cover to a geothermal project.
The first beneficiary of the pan-African multilateral insurer’s regional liquidity support facility (RLSF) is the 35 MW Menengai Geothermal Project, a power station owned by Globeleq, a UK-based independent power producer (IPP).
The guarantee instrument for the $117 million (Sh15.15 billion) project will cover the risk of payment default by public entities - Kenya Power and Lighting Company (KPLC) and Geothermal Development Company (GDC) - a government-owned company formed to accelerate the development of geothermal resources in Kenya.
Kenya’s power sector benefits immensely from an active private sector and boasts abundant renewable energy resources with hydro, wind, and geothermal projects dominating its energy mix.
The government has also outlined ambitious plans to increase the country’s electricity generation capacity from 3,078 MW in 2023 to 5,000 MW by 2030. Geothermal projects are expected to play a significant role in achieving this target and in advancing the nation’s renewable energy goals.
The landmark announcement that geothermal project, the first to be considered for RLSF cover in Kenya, is set to benefit from ATIDI’s liquidity instrument was made on the first day of the Africa Energy Forum (aef) 2024 in Barcelona, Spain.
ATIDI Chief executive Manuel Moses said the pan African multilateral insurer was proud to collaborate with Globeleq, KPLC, GDC, and the Government of Kenya on the transformative project.
“This partnership, coming so soon after the signing of the RLSF MoU in February 2024, underscores our commitment to fostering sustainable development and promoting renewable energy solutions across Kenya and the region,” he said in a statement.
Energy transition
“Together, we are driving positive change and advancing Kenya’s energy transition. Given Globeleq’s huge and growing portfolio of renewable energy projects across the continent, we look forward to building on this partnership.”
Globeleq Interim CEO Jonathan Hoffman, congratulated ATIDI on the landmark deal and committed to continue working with the insurer and their partners on future energy projects.
“The Regional Liquidity Support Facility is a critically important product that gives companies the comfort around payment from customers that they need in order to invest in major renewable power projects in Africa such as our Menengai geothermal project in Kenya,” he said. Hoffman said the product from ATIDI, KfW Development Bank and the Norwegian Agency for Development Co-operation (Norad) provides critical liquidity support against payment default allowing companies like Globeleq to invest with confidence.
The credit enhancement instrument available to renewable energy IPPs that sell the electricity generated by their projects to state-owned power utilities, is offered to member countries that have signed RLSF Memorandum of Understanding.
Geothermal Development Company will supply steam to the project by under the terms of a 25-year power implementation and steam supply agreement, while the electricity generated will be sold exclusively to KPLC under a power purchase agreement for the same duration.
The Project Company also benefits from a Letter of Support from the Government of Kenya. Kenya, the host country of ATIDI’s headquarters, became the 10th member state to sign the RLSF MoU after Benin, Burundi, Côte d’Ivoire, Ghana, Madagascar, Malawi, Togo, Uganda and Zambia.
The RLSF MoU aims to encourage collaboration between ATIDI and its member states in identifying, developing, and implementing renewable energy projects.
